With Twitter’s IPO making splashes in both the news and the actual market, Joe Barbano from our Boston office took a deeper dive into four larger trends of the past decades within the public technology sector as reported by TechCrunch. This comes at a particularly interesting time for publically traded tech companies. As some of the larger technology companies are seeing slowing revenue and vulnerability, smaller startups are entering the public market at a greater rate than in the past several years. While the resurgence of new tech IPOs is nowhere near the mid-1990s dotcom bubble rate, there is definitely something to show for this year’s 25+ tech IPOs that have hit the market out of total 145 newly public companies. Included in this arena are 3D printing companies, cloud-based marketing software firms, big data firms, and several other of the hot areas that have flooded the pages of tech publications like TechCrunch, VentureBeat, Wired, and Business Insider.
A Roller Coaster History
Since the 1980s when technology companies accounted for a mere 1.7% of global equity, the tech sector has famously seen its fair share of ups and downs. The story of the 1990s tech bubble is well known. Year after year growth among Internet companies (often ones with little strategy or business plan) eventually hit a climax in March of 2000, right before a steady loss of $5 trillion in market value. Whereas at the dotcom peak, public tech companies accounted for 25% of global equity, today the number has settled down closer to 15%. If anything can be predicted by past times, it is that the public technology sector is volatile by nature.
From the Power of Few to a Fragmented Many
In the early 1990s a few large companies controlled a vast majority of the entire tech sector. The market was so lop-sided that ten behemoth companies represented over 80% of the sector’s value. The dotcom flood of IPOs changed the story dramatically with this number dropping to a mere 5%. Today, many think that the market is healthier and more competitive than ever before with the top ten companies only holding 30% of the total technology market cap.
A Lower Overall Market Cap
In comparison to the early 2000s, today the top ten tech companies have a lower total market cap nearing $2 trillion. Even the tech giants of today have price-to-earnings ratios that fall within current market norms, rather than the outlandishly high P/E ratios that characterized the internet bubble.
The Makeup of the Sector
Telecommunications and computer makers dominated the early 1990s public sector. As home computers became standard and technology became an even-more integral part for daily business operations, software dethroned hardware as the market frontrunner. IT spends shifted to heavy software development to support enterprise solutions and companies like Microsoft and Oracle became the buzzing companies of the 2000s. Unsurprisingly, more recently the mobile revolution has helped companies like Samsung and Apple become the top power players.